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Financial Management MCQ Questions and Solutions with Explanations | Commerce

Financial Management MCQ Questions and answers with easy and logical explanations. Commerce provides you all type of quantitative and competitive aptitude mcq questions with easy and logical explanations. Financial Management MCQ is important for exams like B.COM, M.COM, BBA, BBM, CA, CS, CMA, CPA, CFA, UPSC, NET, Banking and other commerce department exam. Page-3 section-9

Each section contains 100 MCQs on Financial Management .
21
An amount invested is Rs 2500 and an amount received is Rs 1500 then return will be
Discuss
Answer & Solution
Answer: Option C
Solution:
Return on investment = Amount recieved - Amount invested
= Rs. 1500 - Rs. 2500 = - Rs. 1000.
22
An additional desired compensation by investors for assuming an additional risk on investment is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
An additional desired compensation by investors for assuming an additional risk on investment is classified as risk premium. A risk premium is the return in excess of the risk-free rate of return an investment is expected to yield; an asset's risk premium is a form of compensation for investors who tolerate the extra risk, compared to that of a risk-free asset, in a given investment.
23
Method and model used to analyze relationship between rates of return and risk is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Method and model used to analyze relationship between rates of return and risk is classified as capital asset pricing model. The Capital Asset Pricing Model (CAPM) is a model that describes the relationship between the expected return. The return on the investment is an unknown variable that has different values associated with different probabilities. and risk of investing in a security.
24
Stocks in market portfolio are graphically represented with
Discuss
Answer & Solution
Answer: Option A
Solution:
Stocks in market portfolio are graphically represented with dashed line.
25
Stock with large amount of contribution of risk in a diversified portfolio is represented by
Discuss
Answer & Solution
Answer: Option A
Solution:
Stock with large amount of contribution of risk in a diversified portfolio is represented by high beta and standard deviation. Beta and standard deviation are measures by which a portfolio or fund's level of risk is calculated. Beta compares the volatility of an investment to a relevant benchmark while standard deviation compares an investment's volatility to the average return over a period of time.
26
Shares or stocks which are protected against withdrawals of funds by an original stock owners are classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
Shares or stocks which are protected against withdrawals of funds by an original stock owners are classified as founders shares. Founders stock refers to the shares issued to the originators of a company. Often, the stock does not receive any returns up to the point that a dividend is payable to the common stockholders. Founders stock comes with a vesting schedule, which determines when the shares are exercisable.
27
Method of stock valuation which is multiple of earning per share, book value and net income is classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
Method of stock valuation which is multiple of earning per share, book value and net income is classified as market multiple analysis. A market multiples analysis is a financial modeling method of assigning a value to assets or to a business.
28
Preferred dividend is Rs 50 and required rate of return is 2.5% then value of preferred stock would be
Discuss
Answer & Solution
Answer: Option C
Solution:
Preferred stock = Preferred dividend / Required rate of return * 100
= 50 / 2.5 * 100 = Rs. 2000.
29
In expected rate of return for constant growth, stock price must grow according to an expected rate and
Discuss
Answer & Solution
Answer: Option A
Solution:
In expected rate of return for constant growth, stock price must grow according to an expected rate and at same price. The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR).
30
Dividend present value for period of non-constant growth in addition with horizon value is used to calculate
Discuss
Answer & Solution
Answer: Option B
Solution:
Dividend present value for period of non-constant growth in addition with horizon value is used to calculate stock intrinsic value. Intrinsic value refers to an investor's perception of the inherent value of an asset, such as a company, stock, option, or real estate. Knowing an investment's intrinsic value is useful for value investors who have a goal of buying stocks and other investments at a discount to this amount.